SENS ANNOUCEMENT

(the "Announcement")

Approval for this Announcement has been granted by:

·    The Lusaka Securities Exchange ("LuSE")

·    The Securities and Exchange Commission Zambia ("SEC")

·    ZCCM-IH

The announcement contained herein contains information that may be of a price sensitive nature.

Investors are advised to seek the advice of their investment advisor, stockbroker, or any professional duly licensed by the Securities and Exchange Commission of Zambia to provide securities advice.

ISSUED ON: 29 June 2023

ZCCM INVESTMENTS HOLDINGS PLC

(Incorporated in the Republic of Zambia)

PROVISIONAL ABRIDGED UNAUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022

INTRODUCTION

In compliance with the requirements of the Securities Act No. 41 of 2016, ZCCM Investments Holdings PLC ("ZCCM-IH PLC" or "the Company") announces the provisional financial statements results of the Company and its subsidiaries (Collectively referred to as the ''the Group'') for the year ended 31 December 2022.

STRUCTURE OF THE ZCCM-IH GROUP

PROVISIONAL ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY

PROVISIONAL ABRIDGED COMPANY STATEMENT OF CHANGES IN EQUITY

1.   FINANCIAL PERFORMANCE

(I)   Group Performance

Performance at Group level was impacted by the performance of Mopani Copper Mines Plc ("Mopani") resulting in a loss of ZMW 3.82 billion (US$ 223.76 million) recorded in 2022 compared to a loss of ZMW11.08 billion (US$ 564.57 million) recorded in 2021. The loss at Group level was on account of :

§ Declined average copper price from US$9,315 per ton in 2021 to US$8,815 per ton in 2022;

§ Lower copper production level experienced at Mopani due to the smelter shutdown; and

§ No significant impairment of goodwill was recognised during the year (2021: ZMW 13.3 billion( US$ 678.73 million)). 

The Group recorded an increase in total assets from ZMW48.3 billion recorded in 2021 to ZMW 50.4 billion in 2022 largely on account of exchange differences from foreign currency denominated assets as well as improvement in the performance of some investee companies.

The Group's total liabilities increased from ZMW34 billion in 2021 to ZMW41 billion in 2022 on account of the Glencore long-term loan facility advanced to Mopani of US$1.5 billion.

The Group's retained earnings as of 31 December 2022 were negative at ZMW10.50 billion (2021: ZMW6.84 billion). The movement in retained earnings is attributable to the recorded Group loss of ZMW3.82 billion recorded in 2022 (2021: ZMW11.08 billion loss).

(II)  Company Performance

Company performance improved with a profit for the year of ZMW 4.26 billion in 2022  from ZMW1.68 billion recorded in 2021. The improved performance was due to a special dividend received from Kansanshi Copper Mining PLC of ZMW3.3 billion (US$ 195 million).

2.   KEY OPERATIONS AND STRATEGIC DEVELOPMENTS

(I)    Mopani Copper Mines PLC ("Mopani")

Below is a summary of Mopani's financial performance which has been incorporated in the Group's Financial Statements:

In 2022, Mopani recorded a loss of ZMW5.08 billion (US$ 298.1 million)compared to ZMW 1.46 billion (US$ 74.2 million). The recorded results were due to reduced copper production levels from 72,694 tonnes in 2022 from 87,618 tonnes in 2021. The lower production levels recorded in 2022 was on account of the smelter shutdown for  45-days from August to September 2022. This shutdown was necessitated by maintenance, refurbishment of critical components, and replacement of refractory bricks.

Mopani's future growth prospects hinges on its planned completion and commissioning of expansion capital projects. The Company has planned for a ramped-up production profile as these projects are expected to be commissioned to full capacity by 2027. In addition to spending on its expansion projects, the Company has continued to ensure that sustaining capital is secured and utilised in the best possible way given the current funding limitations. During the year, Mopani has spent US$77.4 million mostly on mining development and the smelter maintenance and refurbishment (2021: US$39 million). The Group  remains optimistic with the enormous task ahead to secure funds for Mopani of more than US$300 million  to complete the expansion projects over the next three years, as well as an additional US$150 million for sustaining capital over the same period.

Considering the above , and as per the Market Announcement dated 15 June 2022, ZCCM-IH engaged a globally renowned investment bank, Rothschild & Co., South Africa (Pty) Ltd ("Rothschild & Co") to assist ZCCM-IH with the strategic review of Mopani to ensure its sustainability and continued development. Mopani's  future will be realised as the expansion projects are progressively completed to be able to produce over 200,000 tonnes of finished copper cathode from 2027 onwards.  Therefore, the review is being undertaken to provide strategic options that will ensure Mopani is operating optimally and is expected to be complement by December 2023.

(II)   Kansanshi Royalty Transaction with FQM

After the year end on 31 March 2023, the shareholders of ZCCM-IH approved an agreement for a royalty transaction between ZCCM-IH and First Quantum Minerals Limited. The transaction involved ZCCM-IH conversion of its 20% equity interest in Kansanshi Mining PLC into a 3.1% life of mine royalty.

This transaction is in line with the key objective of the ZCCM-IH strategic plan of maximising value extraction from investments.

The implemented Kansanshi Royalty transaction will ensure the following benefits to ZCCM-IH;

·      Guaranteed revenue: ZCCM-IH expected to record consistent and predictable revenue over the entire mine life and will therefore benefit throughout the existence of the KMP mine if it is in operation.

·      Greater revenue: Royalty produces greater total revenue over time compared to the dividend model.

·      Access to financing: Greater capital accumulation will lead to improved access to financing; and

·      Drive portfolio growth: Improved cashflow will allow increased investment into greenfield and brownfield projects.

(III)  Delayed Publication of 2021 and 2022 Financial Statements

In 2021, ZCCM Investments Holdings PLC ("ZCCM-IH" or "the Company") acquired 90% shareholding in Mopani Copper Mines PLC bringing its shareholding to 100%. As a result of this acquisition, an independent valuation of Mopani's assets and liabilities at acquisition was required as per the provisions of the International Financial Reporting Standard 3 (IFRS 3). This process took longer than expected and resulted in delays in finalising the 2021 and subsequently the 2022 Financial Statements. This valuation exercise has now been completed and undergoing further audit reviews.

Considering the above, the 2022 comparative amounts in the statement of profit or loss and other comprehensive , statements of financial position, statement of changes in equity have been updated to reflect the draft valuation results of the fair valuation of assets and liabilities related to the acquisition of 90% shares of Mopani as of 31 March 2021. The key changes made to the 2022 comparative amounts include:  

·      Accounting for goodwill totalling ZMW 13.3 billion which was recognised at acquisition and impaired in 2021. The accounting treatment of goodwill is in accordance with the International Financial Reporting Standards; and

·      Certain comparative (2021) amounts in the statement of profit or loss and other comprehensive income have been re-presented such as revenue, cost of sales, other administration expenses , to ensure consistency.

The Company expects to publish its audited Financial Statements by 31July 2023.  In the interim, ZCCM-IH is issuing to the shareholders and the market the unaudited Financial Results for the year ended 31 December 2022. The unaudited financial results for the year ended 2021 were issued in 2022.

3.   OUTLOOK

ZCCM-IH continues to position itself to pursue more opportunities in the mining sector. As per ZCCM-IH strategy, which is focused on mining and mining related investments, the Company will seek mutually beneficial investments. ZCCM-IH is pursuing specific projects in gold, manganese, copper, cobalt as way of maximising value extraction and improving shareholder value.

     ZCCM-IH's focus going forward continues to be:

·       Raising both short-term as well long-term capital to support mining and mining related investments within the group. Critical to this is the raising of adequate capital for Mopani to enable the growth and sustainability of the mine ;

·       Implementation of more predictable alternative income streams such as royalty model;

·       Continued research and development to support investments in viable mining and mineral value Addition projects;

·       Continued implementation of the turnaround plans for loss making investee companies; and

·       Divestment from non-viable and non-mining related investments.

By Order of the Board

Charles Mjumphi

Company Secretary

Issued on 29 June 2023

APPENDICES

US DOLLAR ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME